Beyond sound bites: Ryanair’s Michael O’Leary on the Future of European Aviation

Ryanair CEO Michael O’Leary has a well earned reputation as a loud-mouth blowhard who will say anything to get a rise from the crowd and get his name – and his crazy story – in print. He’s adopted the “all press is good press” strategy and executed on it nearly flawlessly over the years. But if you can get past the misogyny (I edited most of it out) and the sound bites to listen a bit longer there are very interesting insights to be had. Take in more than just the one-liners and real strategic ideas start to come through.

O’Leary recently spoke at the Future Travel Experience Europe conference in Dublin. During the 40ish minutes he spent on stage he delivered views on everything from ancillary sales to loyalty to in-flight internet connectivity to customer service. I’ve distilled the full performance down into a few clips that I believe do a great job of presenting his view for the future of aviation in Europe; some topics will have an impact beyond those borders as well.

Future of European Aviation

Europe has a ton of airlines. Part of that comes from most countries operating a flag carrier. Part of it comes from the standardized rules and regulations allowing free operations of any licensed carrier anywhere within the Community. And part of it comes from a population that seems to love travel. The reasonable vacation time policies probably don’t hurt, either. Ryanair is one of those airlines and a major player in the market, carrying approximately 15% of the short-haul traffic today.

But recent years have seen consolidation more than expansion. Sure, a couple new operations pop up every now and then with a handful of aircraft trying to break in to specific point-to-point markets, but among larger carriers consolidation is the name of the game. And there’s a decent chance of liquidation for a couple, too. When considering the future O’Leary suggests that we are 5-10 years away from four main airlines operating in Europe (of course Ryanair is one of them). He believes the other LCCs (namely EasyJet and Wizzair, the larger ones that provide decent competition to his operation) will be consumed by one of the three big airline groups (LH Group, IAG, AF/KLM) or run out of cash while trying to push through to profitability (Norwegian). And he reminded the group several times that no other airline will be able to sufficiently cut expenses to catch up with Ryanair’s ridiculously low costs. He does point out that Ryanair is “an airline therefore there is a high propensity for doing something stupid” to screw that up (again, the sound bite), but he is also clear that such moves are very rare for the company.

Long-haul service

He also reiterated a few times that Ryanair is not getting into the long-haul business. While that topic has come up a few times – I think early 2015 was the most recent – it simply isn’t going to happen. That’s one of the many “great distractions” the company could face that would cause it to fail at the core mission of selling a ton of seats in the European short-haul market. Plus, there’s already way too much competition there where cost is the driving factor. It would be much harder to maintain the low margins to undercut the market with Norwegian’s large footprint in place today, and other, little players keep cropping up as well. But that doesn’t mean long-haul is completely off the table.

The partnership with Air Europa is strong and progressing. The main challenge to selling true connecting itineraries on a single ticket remains integration of Ryanair’s back-end systems, running on Navitaire, with the Sabre and Amadeus platforms that typically power the larger airlines. Navitaire is known for being weak on interline systems (one of the reasons JetBlue migrated to Sabre a while back) but rather than upgrade its systems to support such Ryanair is in the powerful position of getting the other airlines to work on its level. O’Leary notes, “We hope to have genuine connections through Madrid by the end of this year.”

Growth in Europe

Currently Ryanair carries ~120mm passengers annually of the 650mm flying. In 6-8 years O’Leary expects that to be 200mm/800mm total passengers flying on Ryanair. And at some point down the line he expects that “Ryanair will top out around” 350mm passengers, representing roughly 40% of the market. It is unclear why he believes growth in the total number of travelers will slow while Ryanair’s share will continue to expand, but that seems to be his expectation.

And it may not matter too much, as by then he expects that the airline will be secondary to all the other products and services Ryanair sells.